Smart business owners plan ahead. Succession planning or an exit strategy should be a part of every business owner’s portfolio. Whether you are thinking of selling your business during the next year or ten years from now, planning is crucial. Here are things to consider when planning to sell:
Remove yourself from the business
Are customers here because of you or because of the business? Begin taking a lower profile while increasing the profile of your product or services; develop a strong management team.
Reduce your personal perks
Ensure that ALL personal perks flow through verifiable and specific expense lines; this will add to your cash flow at selling time.
Increase your sales yearly
Rising sales, even by a small percentage, increase the intrinsic value of your business.
Develop your brand
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Update your business plan regularly
This will give you stronger direction as well as providing an incoming buyer a foundation upon which to build.
If possible, keep your accounts receivable at 30 days
If AR is to transfer with the sale, buyers often discount 60 days or older.
Sell all unnecessary assets
By lowering your inventory to the lowest level at which you can comfortably operate, you minimize the potential for out-dated, lower value inventory at time of sale.
Employee Review
Employees are your most important resource. Recognize and reward valuable employees, eliminate unproductive employees. If family members are not staying after the sale, try to replace them with other employees (particularly if they are key to your operation)…if the business cannot run without them, the business is less saleable. A strong in-place management team at the time of sale is extremely valuable.
Write all procedures
Have employee job descriptions and written operations procedures for all segments of the business. Buyers value wellorganized operations; this organization will also ease the transition for both employees and the new management. As owner, develop a simple descriptive manual of what you do within the company—write down the information “that is in your head” so corporate knowledge can be more easily transferred.
Try not to allow your largest customer to represent more than 30% of your business
In some businesses this is inevitable. While this can be economically sound from an owner’s view, a new buyer can be skittish when seeing how your company relies upon the continuing success of one customer.
Limit liabilities
Are your long-term notes assumable?
Review lease
What options exist for lease transfer? For ending, extending your lease?
Reduce unnecessary large purchases
Weigh the pay-back on your investment before a large purchase…could the item be leased?
Update your website
A current and attractive website is a valuable asset when describing your company to a potential buyer.
